General Mills (GIS 56.00, +0.48) has ticked up 0.9% in pre-market after reporting better than expected results and issuing cautious guidance.
The food processing company reported above-consensus second quarter earnings of $0.73 per share on revenue of $3.81 billion, which decreased 3.1% year-over-year, but was ahead of expectations.
Like overall net sales, organic net sales fell 3.0% due to volume reductions in the North America Retail and Europe & Australia segments. These reductions were partially offset by benefits stemming from positive net price realization and product mix.
Adjusted gross margin improved by 70 basis points to 35.1%. Cost control methods more than offset the impact of volume deleveraging and modest input cost inflation.
Looking at the segment breakdown, North America Retail sales fell 3.0% to $2.39 billion. Double-digit declines in the U.S. Yogurt unit were partially offset by growth in the U.S. Snacks unit. Organic net sales declined 4.0% while segment operating profit increased 9.0% to $508 million due to benefits from net price realization and lower advertising expense.
Convenience Stores & Foodservice Segment net sales were little changed year-over-year at $488 million. Growth in the Focus 6 platform, including cereal, yogurt, biscuits offset declines on frozen dough products. Organic net sales were flat year-over-year while segment operating profit was also unchanged, coming in at $106 million.
Europe & Australia net sales fell 14.0% year-over-year to $487 million. Part of the decline was due to an extra month of results for Yoplait Europe during last year's quarter. Organic net sales declined 9.0% while segment operating profit fell 34.0% to $37 million.
Asia & Latin America net sales rose 10.0% to $440 million due to an extra month of results reported for the company's Brazil operation. Organic net sales grew 8.0% while segment operating profit fell 18.5% to $22 million.
Going forward, General Mills expects that organic net sales will decline between 1.0% and 2.0% during fiscal year 2018, which is shy of current market expectations. Adjusted earnings are expected to grow between 1.0% and 2.0%, which is also below market estimates.